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TSMC dossier (5): The winning formula
Colley Hwang, DIGITIMES, Taipei 0

TSMC's capital expenditure exceeded US$10 billion for the first time in 2016. If TSMC further increases its capex and it drives investments into peripheral businesses and attracts funds from foreign corporations, the contribution these investments will make to Taiwan's GDP growth is worth investigating.

Taiwan's GDP came to US$566.3 billion in 2016. GDP is the sum of government spending+investment+trade surplus+private consumption. Calculated based on the assumption that investment accounted for 20% of Taiwan's GDP, investment in Taiwan amounted to about US$110 billion. TSMC represented no less than 10% of the country's total investment. TSMC's enormous investment came at a time when others were not eager to make investment.

The share of TSMC's capex among its revenue grew from 30% for 2015-2018 to around 40% in the recent two years. As the industry transitions into the EUV era, TSMC has begun forward planning by purchasing more than half of the EUV equipment produced around the world. It has also announced its capex is set to reach US$100 billion over the next three years. That is, the share of TSMC's capex among its revenue will expand to 50%.

It has not been a problem for TSMC to invest in equipment and R&D. However, access to stable electricity supply may be the Achilles heel to TSMC as EUV equipment is extremely power-hungry. For TSMC to have access to high-quality utility services fo electricity, water and others, it has been enjoying long-term support from the government and society. And in return, TSMC has never dodged its corporate social responsibility. TSMC has pledged to donate five million doses of COVID vaccine to the Taiwan government - a clear expression of the foundry house's corporate culture and its win-win approach to fulfilling its corporate social responsibility.

It is not easy to run a good company, not to mention one that is highly connected to social values while maintaining a high level of autonomy. By leveraging Taiwan's industrial advantage, TSMC has built up layers upon layers of barriers on the foundation of its utmost core values that have propelled it to success.

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(Editor's note: This is the fifth part of a series of analysis by DIGITIMES Asia president Colley Hwang about TSMC's competitiveness and the foundry sector.)

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.
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